<BREAKFAST WITH THE FOOL>

Tuesday, February 9, 1999

"Vacation is time off to remind employees that the business can get along without them." -- Earl Wilson

Latest Market Numbers

Lycos Hooks Up With USA

Flying solo no more, Internet portal Lycos Inc. (Nasdaq: LCOS) has agreed to be acquired by USA Networks (Nasdaq: USAI). Under the terms of the agreement, Lycos will merge with USA's Home Shopping Network, Ticketmaster, Internet Shopping Network/First Auction, and Ticketmaster Online-Citysearch (Nasdaq: TMCS). The new venture will be called USA/Lycos Interactive Networks Inc., with USA Chairman and CEO Barry Diller serving as chairman and Lycos President and CEO Bob Davis as the new company's president and CEO.

USA shareholders will own 61.5% of USA/Lycos Interactive Networks, Lycos shareholders will have a 30% interest, and Ticketmaster Online-Citysearch shareholders other than USA will control 8.5% of the company (including USA, they would own roughly 19%). If the initial USA/Lycos shares achieve an average market value of $45 billion over specified periods, Lycos shareholders will be rewarded with an increase in their stake, to 35%, and TMCS will end up owning 8.65%.

The deal includes such hot Lycos properties as search engine HotBot, homepage building sites Tripod and Angelfire, and technology news provider Hotwired.com, as well as event ticketing specialist ticketmaster.com and local city guides provider citysearch.com. The companies involved say that USA/Lycos will reach around 30 million people, or nearly half of all Web users. But the biggest winner here may very well be Internet venture capital firm CMGI (Nasdaq: CMGI), which owns about 20% of Lycos. Check out transcripts of the Fool's StockTalk interviews with Lycos CEO Davis and CMGI head honcho David Wetherell.

News to Go

Pharmaceutical company SmithKline Beecham (NYSE: SBH) announced it will sell its clinical laboratory operations to Quest Diagnostics Inc. (NYSE: DGX) for around $1.3 billion in cash and stock ($1 billion in cash and 12.6 million newly issued shares). SmithKline will own about 29.5% of Quest. As part of the deal, Quest will be the exclusive provider of testing to support SmithKline Beecham's clinical trials testing requirements worldwide.

AMR Corp.'s (NYSE: AMR) American Airlines threatened to sue its pilots' union if a sickout isn't called off by the upcoming President's Day holiday weekend, The Wall Street Journal reported. The nation's second-largest airline was forced to cancel 500 flights, or 22% of the 2,250 scheduled yesterday. The union dispute concerns American's acquisition of Reno Air (Nasdaq: RENO). The Allied Pilots Association (APA) is demanding immediate pay raises for Reno pilots who will move into higher-paying jobs at American as well as for American pilots who will move into higher-paying positions as a result of the transaction. The APA also wants to place all Reno pilots at the bottom of its seniority list, rather than ranking them based on length of service at either airline.

Eastman Kodak (NYSE: EK) has started offering photo processing on CD-ROM disks through a new product, called Picture CD, jointly developed with Pentium chip maker Intel (Nasdaq: INTC) with software by Adobe Systems (Nasdaq: ADBE). The service will be available by this summer through more than 40,000 retail outlets that handle standard film developing.

Share buybacks: 3M, or Minnesota Mining & Manufacturing Co. (NYSE: MMM), has authorized repurchasing up to 12 million shares through year end... Outpatient surgery centers operator Healthsouth Corp. (NYSE: HRC) plans to buy back as many as 70 million shares, worth about $1 billion... Glenborough Realty Trust (NYSE: GLB) says it intends to repurchase up to 3.1 million shares, or about 10% of the total shares outstanding.

Latest Earnings Announcements:

Adolph Coors Co. (Nasdaq: ACCOB) -- Q4 EPS: $0.25 vs. $0.15 last year; estimate: $0.21
Duane Reade (NYSE: DRD) -- Q4 EPS: profit of $0.56 vs. loss of $0.05 last year; estimate: profit of $0.52
Gemstar International Group (Nasdaq: GMSTF) -- fiscal Q3 EPS: $0.33 vs. $0.23 last year; estimate: $0.31
Times Mirror Co. (NYSE: TMC) -- Q4 EPS: $0.93 (continuing operations) vs. $0.79 last year; estimate: $0.84

More Foolishness

Another day means another buy and sell in Boring Port land. Dale waxes poetic about Gateway and shares his likes and dislikes when it comes to investor conferences... The latest Rule Maker Portfolio report defends full-price, I mean, full-service brokers. Has Al lost his mind, or is there some logic to this madness?... Check out the latest Daily Double with a cute name: Koala Corp.

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor